The development of co-bots - robots able to safely work alongside humans - is a space investors should be getting excited about, GAM’s Ernst Glanzmann has said.
‘In Japan, price hikes should more than offset increased personnel costs, with an increase in merger and acquisition activity, potentially constraining the impact of the labour shortage.
‘In this respect, we will also be monitoring the potentially increasing use of co-bots in the services sector,' he said.
Glanzmann currently has 13.42% of the portfolio allocated to technology, 32.07% allocated to industrials and 4.34% allocated to materials.
He said there is one product, in particular, he is watching as we move through 2018. ‘We are particularly excited about the potential for solid-state batteries to replace lithium ion equivalents and the ongoing development of AI speakers using voice prints to replace passwords.’
Land of the rising equities
Elsewhere, Glanzmann said the team has frequently argued that the supposed inverse correlation between the yen’s exchange rate and Japanese share prices is something of a red herring.
‘This is a recent phenomenon and the economy is insufficiently export-biased to justify such an inter-relationship.
‘However, there is no doubt that policies to re-ignite the economy have been hampered by the currency’s safe-haven status, particularly in the post-crisis years. As such, investors typically think of Japan as a country where the only thing that rises is the yen.’
With the exchange rate against the US dollar proving relatively stable at around or slightly north of yen 110, and a stock market trading at 20-year highs, Glanzmann said the team expects institutional investors to at least neutralise their structural underweight to Japanese equities.
‘Japan benefits from a very vibrant corporate landscape and is home to some global leaders in 21st-century technology, electronic components, and robotics.
'With many of the worlds equity indices trading at or near record highs, it is also worth bearing in mind that Japanese equities remain cheap, particularly on a price-to-book basis.
'Moreover, there is plenty of scope for a few more years of robust performance before we get close to eclipsing the record high in share-price indices witnessed in 1989.’
Over the three years to the end of December 2017, the GAM Star Equity fund returned 54.68% in Japanese yen terms. This compares with a 37.40% rise by its Citywire-assigned benchmark, the Topix TR, over the same time period.